Does education cause better health? A panel data analysis using school reforms for identification

Abstract

We address whether the relationship between education and health can be interpreted causally. Alternatively, both may be determined by common unobserved factors such as individual time preferences. We add to the primarily US-based evidence by using a Danish panel data set of employed persons, and use Danish school reforms to instrument education effects on self-reported health (SRH), body mass index (BMI) and an indicator for never been smoking. Education is related to all three measures in the expected way and the relationships are amplified in magnitude when education is instrumented. However, as the standard errors also increase when using instruments, neither exogeneity nor the null of no effect of education can be rejected for SRH and BMI. We address important criticism of our identification scheme, including tests for presence of weak instruments as suggested by Hahn and Hausman (Econometrica 70 (2002) 163). None of the supplementary analyses reveal problems with the estimation strategy, so the analyses remain inconclusive.

Introduction

The interest in the relation between social status and health is not new, but has received renewed interest during the last couple of decades, both within academia and in the public.¹ In this paper we address whether education related health differentials can be interpreted causally. This is of tremendous importance for our understanding of determinants of health as well as for our understanding of how schooling affects and shape individual lives. Education may cause better health in several ways. Education influences job opportunities and income, which in turn may influence health. Education may also enhance knowledge of how to live a healthy life, leading to improved choices of use of time and goods that affect health, see e.g., Kenkel (1991). Moreover, just as education is believed to enhance market productivity, education may enhance health productivity as argued by Grossman (1972). There might also be non-behavioral reasons for causal social gradients in health, e.g., relying on psychosocial factors as described for instance by Adler, Boyce, Chesney, and Choen et al. (1994).

However, there exist plausible reasons why education related differences in health cannot be interpreted causally. We focus on hypotheses suggesting that the relationship between education and health may be due to unobserved variables. This gives rise to a standard missing variables problem, which biases estimates of the effect of education on health. One important potential missing variable is childhood health or more broadly, health endowments shaped prior to educational attainment. Another potential missing variable is the individuals preference for the future, because these preferences affect the likelihood of engaging in activities with current costs and benefits that are harvested in the future. Educational attainment and good health behavior can both be regarded as such activities. Therefore, with health endowments and time preferences unobserved, we may observe adults with low schooling and poor health and vice versa, even when schooling plays no direct role for health outcomes. Compared to the significance of the subject, very few studies have addressed whether education effects on health can be given a causal interpretation.

We add to the existing literature by employing institutional changes, Danish school reforms, to identify education effects on health. Furthermore, we use a panel data set of Danish workers, which allow us to control for unobserved heterogeneity over time. Our analysis provides evidence on data from outside the US, where most of the existing evidence is from. We therefore contribute to the task of providing robust evidence, less sensitive to institutional settings and cultural habits, which might affect the relation between health and education. Finally, we address various criticism of the identification scheme, which among others includes an application of two new tests for the presence of weak instruments.

The results show that education is significantly related to both self-reported health (SRH) and body-mass index (BMI; weight (kilograms) divided by squared height (meters)) in healthy range. When the education effect is instrumented, it increases in magnitude, but so does its standard error. Therefore, we neither reject that education is exogenous nor that it has no effect on SRH and BMI. This result may be due to weaknesses of the estimation strategy. In supplementary analyses it is however not possible to detect any problems with the estimation strategy. Therefore the results remain inconclusive.

The paper is organized as follows. In Section 2 we discuss theory on the relation between education and health and mention results from previous empirical studies. In Section 3 we present the data, and in Section 4 we discuss the empirical model. Section 5 presents the school reforms and Section 6 contains the main empirical analysis. Section 7 provides a discussion and Section 8 concludes.